A Capacity Cushion Is the Amount of Inventory That a Firm

question 101

True/False

A capacity cushion is the amount of inventory that a firm maintains to handle sudden increases in demand or temporary loss of production capacity.

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Definitions:

Asset Life

The expected period during which an asset is considered useful in the operations of a business, influencing depreciation calculations.

Average Rate

A calculation used to determine the mean value of a set of rates over a specified period, often applied in finance to find the average interest rate.

Operating Income

The profit realized from a business's core operations before taxes and interest.

Net Cash Inflows

The amount of cash that a company receives minus the amount of cash it spends over a certain period.